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Last week the storm clouds began to gather again around the U.S. Department of Transportation’s (DOT) rulemaking on foreign control of U.S. airlines. Both the U.S. State Department and the DOT made public statements about another delay in issuing a final rule to address concerns raised by Congress. The U.S. stated that it would still abide by pledges made by both the U.S. and EU in June that committed both sides to concluding a open skies agreement by the end of 2006 (with implementation slated for mid-2007).

Also, The Times (London) reported earlier this week about an internal BAA study indicating that BAA expects significant difficulties in accommodating the expected traffic at London Heathrow if a U.S.-EU open skies agreement came into effect. This development is likely to be cited as evidence by prominent U.S. critics of the agreement, such as Continental, who have argued that DOT should renegotiate with the EU and insist on fair access to commercially viable slots and facilities at London Heathrow.

As the Institute has noted in its comments to the DOT regarding the NPRMand SNPRM on foreign control of U.S. airlines, in the long run only a comprehensive elimination of foreign control limitations will truly liberate the marketplace for air services. However, finalizing the DOT’s proposed rule remains a solid incremental step within the constraints imposed by the current law.